Treasury officials are discussing proposals to change the inflation–targeting
remit of the Bank of England and hand more powers to Mark Carney when he
becomes Governor this summer.

Last month, the Treasury set up a unit to explore changes to the Bank's remit amid mounting political pressure for action to boost economic growth. The Chancellor renews the remit of the Bank each March at the Budget.

Options for George Osborne include giving the Monetary Policy Committee greater time to bring inflation back to the 2pc target, handing the Bank a dual mandate to target both employment and inflation – similar to that of the Federal Reserve in America – or targeting spending in the economy rather than inflation.

The unit could also look at a temporary rather than permanent change to the goal.

The Canadian central banker, who replaces Sir Mervyn King in July, has said that "considerable monetary policy" is required to take up the slack in the British economy.

The last time the remit was changed was in 2003, when Gordon Brown swapped the measure of inflation from the Retail Prices Index to the Consumer Prices Index in order to facilitate comparisons with the euro–area. He also reduced the target to 2pc from 2.5pc.

Among the more “unconventional” policies he said the Bank should consider was a more “flexible” 2pc inflation target that allowed prices to stay high for as long as three years, compared with current policy of bringing it back to target within two years.

The arrangement would allow rates to remain low for longer or permit more stimulus, such as quantitative easing.

Mr Carney also raised the prospect of guaranteeing that rates would be fixed for a set period, or until unemployment or growth hit a certain target – as in the US .

“In the UK today, there is a valid discussion to be had about the potential use of this tool,” he said, saying there was “merit” in the US strategy.